transcending issue that certainly encompasses everything we're talking about today does relate to the way the changing landscape of energy in america, with this low price natural gas we see a transformation from coal to natural gas. ..

>> they have an overcapacity of electricity this europe, and as a result, they have a very low wholesale prices, which is good. but their residential rates and their manufacturing rates are the highest in the world because of renewable surcharges. and so what's happening over there is they're trying to make this transition too quickly, in my view, and that's what people are trying to do in america as well. but what's happening over there is that the utilities, the base load utilities have lost like $800 million in market valuation over the last 15 months or so. and so as you go to renewables and you try to, you have to place more emphasis on distribution at the local levels, there's not enough capital this in the utility industry -- in the utility industry there to meet those

needs. and so they have a real conflict in europe right now. and interestingly enough, they've mothballed 30 gigawatts of plants producing electricity from natural gas in europe because of the high cost of natural gas with coming out of -- gas coming out of russia. and we had our largest export market of coal last year in recent memory, and the europeans took 45% of that because when germany closed down their nuclear power plants, they realized and other countries over there realized they have to use some coal. and so this administration who talks all the time about all of the above policy is, in effect, in their greenhouse gas going to prohibit even the option of building a new coal-powered plant in the future. so if we're going to talk about an all of the above policy and say that is our policy, then dashed be -- then that should be

the policy. that should be the policy. and so we've introduced legislation. we don't expect anybody to build a new coal-powered plant right now with natural gas this low, but if in the future -- like in europe, what they're discovering -- it should be an option. and so i look forward to the testimony of the commissioners today to get some of their views on if challenges facing us, and i look forward to your comments, mr. norris. i know you made the comment recently at a smart grid conference in november about you, your personal view is we don't maybe need any more infrastructure for natural gas and fossil fuels. i may be wrong, but i think you made that comment. and many of us would disagree that, particularly with the additional fields we have and the northeast talks to us all the time about not having the infrastructure to get the gas to where it needs to be. but we all recognize that we

have a lot of challenges, and we can't meet those challenges unless we work together to meet them, and we're going to continue to provide an alternative view, particularly in the area of energy, where we think there are serious disagreements and with dire consequences that are possible. so with that, at this time i'd like to recognize the gentleman from california, mr. mcenough any, for his five be minute opening statement. >> thank the chairman. i want to thank the commissioners for coming out here today. this is an area that i have a lot of passion for and a a good background in. as we know, ferc has broad jurisdiction over the electricity and natural gas markets such as setting electricity and transmission rates, overseeing regional transmission organizations such as the one we have in california. it's now time to make some

important decisions about our nation's energy infrastructure, and ferc will be an essential component of that decision making process. efforts to increase renewable energy production, growth of natural gas and the need to insure a secure grid will all be critical issues. in fact, there's no shortage of issues to discuss including what defines the public interest with natural gas exports, licensing lng facilities, smart grid innovation, renewable energy to name only a few. states such as california are implementing aggressive renewable portfolio standards, and there's a need to insure grid stability. it's becoming increasingly important that we have an energy infrastructure be that's -- infrastructure that's capable of meeting these demands. our energy infrastructure needs cyber and physical protections. threats to our grid are real, and transitioning to smart grids

presents both an opportunity and a threat to grid security. the energy policy act of 2005 made significant progress providing ferc with the authority to oversee power grid and to establish critical infrastructure protections. however, more needs to be done to protect the grid. the energy policy act forced -- focused on both power systems which can exclude some transmission, local distribution and other grid facilities. i think it's worth exploring ferc's role in the grid, an area of increasing innovation and technical developments. these are areas which we can improve upon such as response during emergency situations and addressing potential improvements to critical grid infrastructure protection initiatives. ferc's coordination with the north american electric

reliability corporation -- a little bit of a mouthful there -- or nerc regarding standards and reliability such as those related to cybersecurity remain a high priority for me. lastly, we must analyze these challenges in the context of climate change, a serious threat to our nation on several levels that has been acknowledged by scientists as well as leaders at the pentagon. combined, these issues will tick tate how -- dictate how we are able to manage and respond to rapidly changing energy technology as well as managing supply and demand in the markets. thisat this point i'd like to yd to my colleague from texas, mr. green. >> thank you, mr. chairman, and thank my ranking member for yielding to me and allowing me to speak. today our witnesses will discuss issues that face our country now and in the future including grid security, gas-electric coordination and infrastructure permitting. it's important to know that texas is the face of the changing energy landscape.

in texas we have demand for energy that's growing exponentially. we have grid issues that threaten our economic growth, we have infrastructure needs for market delivery and power generation. we must coordinate and balance all these challenges with the resources necessary to overcome them. wind power and natural gas offers texas a way to clear all these obstacles. additionally, our domestic supplies allow us to meet not only our challenges, but those of our neighbors. but this, too, must be addressed. last month we held a hearing on the north american energy infrastructure act. at the hearing, ferc was concerned about h.r. 3301 with the effect of their ability to comply with section three and section seven of the natural gas act. i think after initial misreadings, we want to emphasize that ferc's section three and section seven authority remain in place. n., it provides ferc additional authority by eliminating the presidential permit process, creating a regulatory structure within the commission and gives ferc the ability to approve the import or export of natural gas

across national bound -- boundaries. i think many members of this subcommittee has confidence in ferc's pipeline ability, and i look forward to discussing all these issues today at the hearing and thank our witnesses for being here and, again, thank my ranking member for yielding to me. i yield back the time. >> gentleman yields back. at this time i'd recognize the chairman of the full committee, mr. upton of michigan, for five minutes. >> well, thank you, mr. chairman. america's energy picture is rapidly changing, and america's energy regulators have got to keep pace. long-held beliefs in american energy scarcity have given way to a new era of energy abun abundance, but many policies and attitudes are still rooted this the outdated assumptions of shortages and rising imports. with a potential to obstruct the opportunities before us. and ferc is in the middle of many of those debates. for example, america's new

abundance of oil and natural gas requires new infrastructure to meet demands and keep prices affordable, and we've got to build this architecture of abundance quickly. given that america's output of oil and gas has been rising every year and is straining the existing infrastructure. but nearly every new project is met with stiff resistance at every step of the process. opponents are enabled by an archaic federal regulatory process that canning be manipulated to cause years of display for lng export cases and can block them outright. while the process at ferc generally works well, there's always room for improvement. canada, australia and midwest e.u. nations have deadlines for their regulatory agencies to act. why shouldn't the u.s. hold our agencies to a similar standard? congress has been active to keep pace with the new energy landscape. the house recently passed h.r. 1900, a bipartisan bill that creates more accountability for the natural gas pipeline

approval process. we'll soon be considering other infrastructure projects as well including a bill i've co-authored with my friend, gene green, to bring more certainty to energy projects that cross our border with canada or mexico to help create a more robust and self-sufficient north american energy market. american energy holds tremendous potential for millions of jobs and for affordable energy prices for everyone from homeowners to small businesses, certainly to manufacturers too. and the u.s. is always the proud global leader in the safe and responsible development of our resources. the prospect of lng exports not only means jobs in the u.s., but also means improved relations with our allies and trading partners and enhanced standing around the globe. but none of these benefits can be achieved if america's energy is choked off by red tape which is reicely why we are examining -- precisely why we are examining the policies today. i look forward to working with the acting chair and all of the

commissioners before the committee. i look forward to a constructive and productive dialogue and process as we move into next year and the years beyond, and i would yield time, anyone to our side needing time? if not, i yield back the balance of my time. >> gentleman wield yields back. at this time i'll recognize the gentleman from california, mr. waxman, for five minutes. >> thank you, mr. chairman. i'd like to thank each of the commissioners for being here today, and i want to congratulate ms. lafleur on her new role of acting chair. there's a broad range of important issues from renewable energy integration and electric transmission modernization to hydropower licensing and enforcement actions to prevent energy market manipulation. but i want to focus on an issue that has not gotten enough attention during this congress, and that's grid security. the nation's critical infrastructure and defense installations similarly cannot function without electricity.

yet it is clear that the electric grilled is not adequately protected -- grid is not adequately protected from physical or cyber attacks, and these are not theoretical concerns. just this april there was an actual attack on our electricity infrastructure. this was an unprecedented and sophisticated attack on an electric grid substation using military-style weapons for the attack. communications were disrupted, the attack inflicted substantial damage. it took weeks to replace damaged parts. under slightly different conditions, there could have been a serious power outage or worse. the fbi and others are investigating this attack. so as not to harm any ongoing investigation, i won't disclose details of the incident, but i have been in touch with the fbi, and they are willing to provide the members of this committee with a briefing on the very real

threat that attacks like this pose to our critical infrastructure. and i hope the chairman will work with me to yet that briefing -- to get that briefing scheduled quickly so that members can get the facts. the april attack is hardly the only threat facing the grid. a few months ago in arkansas, there were multiple attacks on power lines and grid infrastructure that led to millions of dollars in damage and brief power outages. independent engineers also recently discovered a new cyber vulnerability in the software used by be many electric grid control systems. we rely on an industry organization to develop reliability standards for the electric grid through a protracted, consensus-based process. ferc lacks authority to directly address these threats and vulnerabilities. and that's incredible. ferc lacks the authority to

address these threats. congress needs to fix this gap in regulatory authority. in 2010 the bipartisan grid act would have provided ferc with the necessary authority. there was a biartisan consensus. -- bipartisan consensus that national security required us to act. that bill was reported out of the energy and commerce committee by a vote of 47-0. and then it passed the full house by voice vote. however, the senate did not act on this legislation. mr. chairman, we worked on this issue in a bipartisan way in the past, and we should be able to do so again. we need to give ferc important new authorities like the authority to take action to protect the grid in emergencies. this is a national security issue that deserves our attention. we should act now while there is still time to protect against successful attacks. thank you, mr. chairman, for this chance to make an opening

statement. i look forward to the testimony of the members of the regulatory commission and to, an opportunity to engage them in questions. yield back my time. >> the gentleman yields -- >> unless any other member on our side wishes me to yield the minute? no, yield it back. >> the gentleman yields it back, so that concludes the opening statements. at that time i would be recognizing each one of you for your five minute opening statement. and all of you are skilled witnesses, and you know that our little lights, red, yellow and green, what they mean. so the only reason i mention that is we're expecting some votes on the floor sometime this morning, and i'm hoping that we'll have an opportunity to go way down the road before that happens. so, ms. lafleur, you're recognized for five minutes for an opening statement. thank you. >> well, thank you very much, chairman whitfield, ranking member mcnerney and members of the subcommittee. my name is cheryl lafleur. for three and a half years, i've

had the privilege of serving as a commissioner, and i've appeared before this subcommittee previously in that capacity. be today i appear before you as the commission's acting chairman, an appointment i received just ten days ago. um, thank you for your good wishes, and i look forward to working with my colleagues and the wonderful employees at ferc in my new role. thank you for holding this hearing today. my colleagues and i appreciate the opportunity to share our work with you. i'm honored to lead the commission at a time when our nation is makeinging substantial changes in its -- making stable changes in its power supply and infrastructure to meet environmental challenges and improve reliability and security. in particular, as you noted, we're seeing significant growth in the use of natural gas for electric generation due to the increased availability and afford about of domestic --

affordability of domestic natural gas and to the flexible operating characteristics of gas generation. and that's, i think, a significant advantage we have over europe with the abundance of domestic natural gas to balance our renewable resources. the second driver of change is our, the tremendous growth of renewable and demand-side resources which is being fostered by developments in technology and by policy initiatives in 39 states and at the federal level. en finally, new environmental regulations are also contributing to changes in power supply. although the drivers of power supply changes are largely outside the commissions' jurisdiction, we must be aware of and adapt to these developments to carry out our responsibilities to insure just and reasonable rates, a reliable power grid and fair and efficient electric and gas markets. my colleagues will discuss several of the ways we are responding. we divided up these topics, and

i want to focus the balance of my testimony on another critical aspect of our work, reliability and grid security. insuring reliability means that the commission and network, our electric reliability organization, really ache care of two things -- take care of two things. one is the day-to-day, nuts and bolts activities like trimming trees and keeping the heights on, emergency response, and the second is emerging issues like cybersecurity. i believe we're making progress on both fronts. in the past three years, we've voted out numerous order toes on the day-to-day type standards of tree trimming, frequency response, planning criteria and so forth, and we hear from network that they are seeing a reduction in transmission-related outages in the grid as opposed to previous years. going forward, we very much have to build on that progress. the emerging issues are somewhat different because we have to try to set standards in an environment of incomplete information. we don't have the benefit of

decades of experience, and we know challenges are revolving. but it's still incumbent upon us to try to develop meaningful, cost effective regulation that we can enforce in an environment of imperfect knowledge. two weeks ago the commission approved version five of the critical infrastructure protection standards that cover the bulk electric grid against cybersecurity incidents. they're not perfect, we did is ask some questions as we approved them, things that we wanted modified, but they represent a substantial step forward from the protections that were in place before with. we've also started a rulemaking to require standards to protect against geomagnetic disturbances that can be caused by solar storms and human actions, a real example of high-impact, low-frequency threats to reliability that we need to get ready for before they happen. finally, i want to touch on the subject that congressman waxman raised, the physical security of

the assets that make up the grid, protecting hem from tampering, vandalism and saab strategy. in -- sabotage. in general, our approach in this area has been based on cooperative efforts with industry and other government agencies, dhs, doe and so forth to try to develop best practices and communicating with industry to make sure they're implementing those best practices. thank you very much for the opportunity to be here today, and i look forward to your questions on any aspects of the commission's work. thank you. >> thank you, ms. lafleur. and mr. moeller, you're recognized for five minutes. >> thank you, chairman whitfield, ranking member mcnerney, members of the committee, thank you for having us back for this valuable oversight role you undertake for the commission. your staff asked us to focus on three areas in our testimony today and add additional items that we thought were relevant, so i'll talk about the three

items, 3,000, pipeline siting and add a couple more, gas/trek rick coordination and some reliability concerns on the electric grilled. i was generally supportive because i felt like it would add to the certainty to build additional electric transmission in this country, and for the most part, i think it's helped particularly with the planning process. it's forced a more open process. there were a couple of areas i disagreed with, the first was how we deal with right of first refusal projects, and this is specific to reliability projects. not economic prompts that reduce congestion costs or trying to promote general generally renewables. but rather, when a utility is required -- because of network standards -- to build a project to enhance reliability, i would have preferred that we give a

very limited time of right of first refusal to the incumbent utilities, because i didn't think the litigation risk was worth it. and we are seeing the litigation now on that issue. hopefully, that will be resolved soon. the second area had to do with the cost allocation methods in the rule and the concern of because of the regional cost-sharing of it, it would give them the incentive to, instead of building more regional projects, just go to local projects. and i think particularly in the midwest we've seen that happen. but for the most part, we have several more years of order 1,000 compliance ahead of us, and we haven't even tackled the interregional filings yet, and those are going to be very complex. so order 1,000 will be with us for a while. related to hydro siting and pipeline siting, i know members of the committee have been concerned about the length of time that's taken. but simply put, we're dependent

on state and federal resource agencies in the process to deliver their part of the analysis. and if they delay that, it will delay our ability to act. and i know there's been legislation to consider moving this up. there is more extensive legislative concepts out there in terms of actually giving ferc the ability to decide whether some of these conditions -- that would take a major legislative change. but if your interested -- if you're interested, we can talk about that further. related to gas-electric coordination, we've been working on this now for about 22 months at the commission. we've had a series of season technical conferences, the first five were regional in nature, then we dug down to a series of issues. the first set on communication, whether people are comfortable talking to each other. when there's typically a weather-related supply squeeze, then we talked about the timing mismatch of the gas trading day

and the electric trading day. of i'm happy to report that as a commission we issued a final rule on a communication protocol just last month. and be i want to thank omb, i don't know who it was, but be they made an effort to make sure we could have a 30-day turn around on that rule so it would be effective december 23rd, before we go into the really tight heating season this year. so they deserve some thanks for that. on electric reliability we do have an impending issue related to the effectiveness of the math rule, and i just want the committee to be aware of the fact that we're looking at some potentially some pretty tight situations in the midwest. the footprint of the mid continent independent system operator perhaps as early as the summer of 2015, but certainly as soon as the summer of 2016. it's something i really think deserves your attention. i know that the miso is working heavily with the states to try

and come up with solutions. we're happy to let them try and solve it, but the time is extremely tight. they can tell you more of the number ors, but we're looking at some pretty small reserve margins for the footprint. and recall that under the miso agreement, they all share the surplus, but they also share the deficits. the pain will be shared in terms of, frankly, rolling blackouts. we can hope for a cool summer in the summer of 206, but that's not necessarily a prudent apreach. so with that -- approach. so with that, happy to answer any questions at the appropriate time. >> thank you, mr. moeller. and our next witness is mr. john norris, and you're recognized for five minutes. >> good morning, chairman whitfield, ranking member mcnerney and members of the subcommittee, thank you for holding this hearing and the opportunity to testify. of there is significant change occurring on our energy landscape. the operation of our energy

system in america has experienced, in my view, only modest, incremental change over the last many decades. yet in recent years, the rapid development of new technologies is bringing much more rapid change to the system. that change can be disruptive, but i think embracing these changes will allow for a much more efficient be utilization of our energy resources. the challenge before us, i believe, is to enable our system to be more efficient through the utilization of new technologies and foster the development of a diverse set of competitive energy resources while at the same time insure we have a reliable supply of power at just and reasonable rates for consumers. as a result of the development of fracking technology, we are experiencing an abundant supply of natural gas and resulting gas prices at their lowest since 2002. this new supply of gas is changing the economics of electric generation, resulting in the retirement of less efficient coal units and most recently, some nuclear plants. the new generation being built

is primarily combined cycle gas plant, wind and solar generation. this recent trend appears likely to continue. this change in our generation mix is being driven by a significant degree by the economics around low price gas and the development of more efficient and productive wind turbines and solar panels. the other drivers are little to no load growth, public policies such as renewable portfolio standards, compliance with the epa rules implementing clean air standards and the development of demand-side management technologies like energy efficiency and demand response. at the same time, changes occurring in our electric generation, we are also experiencing significant developments in technology around grid operations. a large percentage of our existing transmission and distribution grid is quite old, and only modest technology enhancements have been made in nearly a century of operations. that system is being replaced by a grid most commonly referred to as the smart grid that is opening up multiple

opportunities for more efficient utilization of our energy resources and expanding the marketplace for electricity to a vast new supply of diverse energy resources. one of ferc's recent focuses has been the adjustment of market rules and regulations to insure that all resources, including new testimonyings, are able to compete in our energy market and our energy m system. the continued investment in new technology and management of our energy consumption is critical for maintaining a competitive energy economy and efficient utilization of our resources. be as our energy system changes, providing stability, market access and fair regulatory treatment is critical to maintaining continued investment in our energy infrastructure. my written testimony covers several recent actions that ferc has taken that reflect our efforts to make adjustments around these new technologies and resources. i'll be happy to answer any questions you may have about these ferc actions, other ferc actions and to help you in your

oversight responsibilities of our agency. thank you very much. >> thank you, mr. norris, and our next witness, of course, is mr. clark, and and mr. clark, you're now recognized for five minutes. >> thank you, mr. chairman, mr. ranking member and members of the committee. my name's tony clark, i'm the newest member of ferc. i've had the opportunity to speak before you in a previous job, but this is my first opportunity as a member of the ferc, so thank you for the invitation to be with you here today. in my opinion and, mr. chairman, this is something you referenced, the biggest story this energy today is the revolution that's taking place in shale gas and shale oil, probably the biggest story in decades. and this flood of domestic gas has really upended utility planning mod be els and market fundamentals. be gas at the sustained prices that we are seeing now, today, is dramatically impacting where utilities are puertoing their money in the buildout of the grid. as an example, in 1990, coal was

possible for about 53% of the electricity that was produced with natural gas producing just 13 percent. eia is projecting that by 2040, 35% of electricity will come from coal and 30% from natural gas. but i would note, however, that predicting these sorts of things is highly speculative. we know there's some pending rule makings by the ep ooh,, and depending on how those come out, it could have a dramatic impact on how these futures play out. such nationwide projections also tend to gloss over the very highly regional nature of our energy and electricity grid. some regions of the country such as the central appalachia, the south are much more heavily dependent on coal and others, so the implications of fuel switch have a much different impact depending on where you live. the commission is heavily engaged in the work of assessing these fuel mix changes and responding to the regional implications of it. for example, ferc has undergone

significant efforts with regard to the implications of gas-electricity interdependency that commissioner moeller mentioned as more electricity generators simultaneously turn towards natural gas as a fuel source. this effort is important nationwide, but it's particularly crucial for a region like new england where a number of factors including geography and state-level policy choices have created an electricity delivery network that is very dependent on a constrained supply of natural gas. the analysis takes on a different shade in other regions of the country, for example, in my home region of the midwest, coal has traditionally been the primary source of electricity, but today a combination of affordable shale gas and impending epa regulations is creating a situation where there are increasing concerns about reserve margins and supply adequacy, as commissioner moeller noted, especially as we get into that 2015-2016 time frame, and that's something we're paying close attention to, and i know the committee is as well.

nonetheless, under any scenario, it's clear that gas will play a much bigger role in the future than it has in past. as you might expect, the shale revolution has in both liquids and natural gas production is having a tremendous impact on the work of ferc itself. as the committee is aware, the ferc has broad oversight of both economic and siting regulation of the natural gas pipeline industry. in recent years the commission has seen a shift in this type of work as industry responds to the burgeoning shale plays. shale gas basin bs have seen significant pipeline investments, pipeline prompts that are either in service or in some part of the permitting process at ferc total now be over 3400 miles of pipe delivering 31,000 -- over 31,000 mmcf per day of capacity with a total investment of over $18 billion. this large amount of natural gas in the is also creating an impetus for something that was nearly unimaginable 10 or 15 years ago which is lng export

applications as opposed to import terminals, and this is the area of significant increase for the commission's workload. presently, the ferc has 13 proposed lng export terminals and three lng import terminals in some phase of the permitting process. and as you'd expect, these are major investments, and the reviews are quite extensive. given the influx of natural gas siting work, i believe the ferc must continually assess our staffing levels and priorities to insure that we task enough resources to process these projects in a timely and thorough manner. in addition, while the ferc has no control over other federal agencies that inform our siting process, i would encourage them to help us by also doing what they can to be timely in their assessment work. mr. chairman, with that, i'll conclude my testimony, and i touched on a few things but, of course, will be happy to answer any questions that you or the committee members may have. >> thank you, mr. clark, and thank all of you for your opening statements.

at this time we'd like the opportunity to ask you some questions, and i'd like to recognize myself for five minutes to get started. mr. clark, you mentioned the difficulty in trying to forecast the future, and i might add that last year epa projected that less than ten gigawatts of the nation's coal-fired generation would retire by 2015 as a result of utility -- [inaudible] it's not quite 2014, and already announcements have been made to close 50 gigawatts of coal-fired plants because of these eing pa regulations -- epa regulations and low natural gas prices. in the past we've had a lot of discussion about one of your missions is reliability, and there's been a lot of discussion about epa, whether or not they take that into consideration and the communication and dialogue

between ferc and epa on reliability issues. do any of you have any concerns? i mean, these plants have been announced they're closing. 50 big watts, that's a lot, but they're not going to be closed for, you know, maybe another year or so. but i would like to -- we'll start with you, mr. clark, to address that issue briefly, and then i'd like to just go down the line. >> sure. mr. chairman, the greatest concern as we've indicated a couple of times already this morning is probably in the midwest, the mid-continent. where they're projecting that by the 2016 time frame they're likely to have a shortfall of somewhere in the neighborhood of seven and a half gigawatts of where they would like to be in terms of reserve capacity. that's a projected number. they're almost certain that there's going to be a shortage of at least a little over two gigawatts. so that's the concern in that

region. there are concerns in other regions, but probably most acute in the midwest. from the my perspective, where i would like to see the ferc go is to maintain its independence as an incompetent regulatory agency -- independent regulatory agency, provide information to all of you, to all of the rest of federal government so they can understand the implications of different policy choices that may be made. >> thank you. mr. norris, do you have a comment on that? >> certainly, yes. i think commissioner clark was -- i share his concerns about miso, particularly in the midwest region, and it could be up to seven gigawatts, they could be looking at an 8.5 reserve margin so, absolutely, i'm concerned about that. >> thank you. mr. moeller? >> well, i remain concerned. i've testified before committee on the same subject. remember that matts takes effect 2016.

the fourth year is only for those plants that are going to retrofit. so if if you've got a marginal plant, you can't afford a retrofit be, it's going to be hut down in roughly about 15 minutes -- shut down in roughly about 15 months. so extremely concerned. ly the midwest, but we even had some issues in september in pjm. we're going to have to be watching this very closely, and we're hoping the epa will be watching it with our help as well. >> and,. [applause] lafleur? >> well, thank you. as you can tell, this is an issue we've been verien gauged in for the past two years. commissioner moeller and i have cochaired a forum with the state regulators on this very issue, and the epa has come to every single one of our meetings and discussed some of the issues, how compliance is going, supply chain issues and so forth. i would say over most of the country i think matts compliance is underway. a tremendous amount of

construction work is going on right now. there's no question the most significant issues are in the midwest due to a variety of factors, and in in addition to relying on the midwest, we need to stay closely involved. >> do you feel like epa is actually listening to you on these reliability issues? >> i do, because in 2011 when they put out their rule, they included a consultive role for ferc if somebody be needs a fifth year, and i believe that includes not just a fifth year of the retrofit, but also -- and not just for retrofits, but also if they need a fifth year to bring transmission in before a plant can retire. and we voted out a policy statement of how we would handle those. we haven't gotten them yet because it's not far enough along in the process. >> they tell us they're listening to us a lot, and sometimes we don't think they are. our views may be different. >> i've been very grateful that they've come to all the meetings, and i have a commitment from them that they'll continue, but it's something that needs close vigilance. >> right. well, i was going to ask you

about your priorities. i felt like mr. welling job hoff's agenda at ferc was basically coinciding with the administration's policy, but i maybe will have an opportunity to talk later about that. at time, my time's expired. i'd like to recognize the gentleman from california for five minutes, mr. mcnerney. >> thank you, mr. chairman. one of things i mentioned in my opening statement was cybersecurity, and i know that's also an issue that's very important to mr. waxman. the thing is that smart be grid gives us -- smart grid gives us a tremendous opportunity to gather information so that we can become more reliable, so that we can predict grid behavior and gives us an opportunity to deliver renewable energies reliably and so on, but it gives the utility companies a tremendous amount of information about individual users, it opens up grids, utility companies for cyber attacks and so on.

ms. lafleur, you said just two weeks ago the excision or pass -- commission passed cybersecurity standards. could you talk about that a little bit? are those mandatory standards, or are they voluntary? let's hear a little bit about that. >> well, thank you very much, mr. congressman. yes, they are mandatory standards. all of the bulk power system along with the nuclear plants are really the only part of our critical infrastructure right now that have mandatory standards. and what's new about the critical infrastructure standards we adopted two weeks ago or we proposed to approve -- or we did in a final rule approve who weeks ago, i'm sorry, is that for the first time they cover not just the super critical assets, but all elements of the bulk power system receive some level of protection. because as you indicated with the increasing digitization of the grid, even smaller assets can potentially be a problem. >> so when do those standards

take effect in. >> they take effect in general in two years, but because of the process of getting ready, but there are standards in place now the earlier generation and the new generation becomes mandatory on top of those standards. but the standards, there are mandatory standards already in effect. >> mr. norris, you mentioned that the old grid technologies are being replaced by smart grid. how do you feel that is, that process is progressing of changing the old with the new, more secure grid technology? >> well, i think it's progressing at the pace of great new technology being developed and then the smart grid interoperability panel working to make sure that the platform is usable for all those new technologies. that's the critical piece right now, i think, is to make sure the investment in this technology is usable. it provides great opportunity for efficiency, and the decision of the cybersecurity standards will, i think, enable that to be a secure system. >> good.

mr. moeller, you mentioned that the ferc is dependent upon local entities to deliver information on some of the pipeline siting permits. how would federal legislation that establishes firm timelines, how would that affect the process? would the states be more responsive, or would it just handcuff ferc even further? >> well, it's largely federal agencies as well. it depends on the project be, of course, resource agencies whether it's federal, state, sometimes even local. i think the key is you can put in statute perhaps timelines, you could also change the statute in terms of our responsibilities. a lot of the times it comes down to management and whether particularly the local office had, makes it a priority to deal with these type of projects that we need the input on. and we've seen a wide range of

responsiveness and and a lack of responsiveness throughout at least the federal agencies related to this. >> so you don't think the legislation would change that? >> well, the legislation in terms of timelines, i think, has some positive accountability aspects, but you also have to be careful as i testified before this committee earlier that you don't force a timeline that results in a no, because they'll say they don't have enough time to analyze. so the timelines and how they're administered would matter. >> thank you. you know, in wake of the enron and california energy crisis in the early 2000s, congress passed the antimarket regulation authority in 2005. recently, ferc had an enforcement action against jpmorgan for market manipulations in california and the midwest. would you comment on how that turned out, chairwoman? >> well, thank you. that's a very important part of

our work. you gave us additional authority in 2005, and ferc has geared up a very, i think, capable enforcement unit headed by a former u.s. attorney. recently, we have voted out a number of cases either ordering somebody to show cause why they didn't manipulate the market or actually a settlement with them in which they acknowledged a manipulation, and jpmorgan is the most prominent. most of them relate to people taking positions in the energy market to benefit something in the financial market that can cause harm to other people mt. energy market. in the energy market. and i think we have to continue to make sure that we are very vigilant that the markets are fair. >> thank you. my time's expired. ... >> this timit is time we recogne gentleman mr. barton. >> welcome to the newest ferc. it's good to have you here,

ma'am and the other commissioners. i listened with interest to all of the opening statements, and i was struck at the regulatory authority for ferc has i it's an agency that almost no one hears about, yet its impact on the u.s. economy to some extent the world economy is extraordinary. so it's a very important position that you poor people. i'm going to focus my questions on lng siting. of all the stuff that you folks have responsibility over, there's probably no more important mission that you hold today in terms of the strategic interest of the united states than citing these lng facilities. the congress gave you the authority to make a final decision or at least on the

permits, backing energy policy act of 2005. at the time we did it we felt he would be using that for lng imports more than lng exports. but the fact is that between you and the department of energy, you have the ability to affect the strategic interests all over the world. i met last evening with some officials from the russian energy sector, and they are very, very aware of the impact lng exports from the united states will have a markets that right now the russians dominate just as an example. i've also met recently with turkey. kazakhstan, some of those countries, qatar, it's just stunning how our ability to produce natural gas with

hydraulic fracturing and horizontal drilling at the prices we can do it, there competitive impacts our ability to affect strategic interest. so my first question is, under law, ferc and deal we have joined authority. it's not real clear -- and d.o.e. -- how that authority if it all, is coordinated. madam chairwoman, is there any ad hoc protocol with the department of energy on how you review the permit process and how d.o.e. interviews just the fact that it's i in the national interest to do the exports? >> thank you for the question. it is a very important part of our work, and as commissioner clark said, we have 13 substantial applications

pending. we primarily worked in our own lane, which is to review the environment and safety issues of the facilities. and d.o.e. reviews the actual national interest, national security issues with the export of the commodity. and so i think our staff communicates so we understand what our mutual status of our, but if we don't actually to my knowledge actually collaborate on the cases. we do our work and they do our work -- their work to my knowledge. >> is there any interest at the commission's level with some congressional legislative guidance on how that process should be coordinated, if at all? >> well, i guess at this moment i'm not aware of any undue delays in our process, although we would always welcome

congressional guidance if we can do it better. i know that there's represented of things bill that would change -- representative upton's bill that would change some of the import export, and i guess i hesitate to comment on anything that is directed at the d.o.e. process because i -- >> my time is about to expire and i'm not trying to be rude at all. i promise you that. but there is a recent decision that the department of energy rejected at least partially an application by freeboard on exporting from their terminal. and it was a partial acceptance, partial denial, but they stated that since the permit request at ferc was for one amount of volume and natural gas per day,

that was less than what they were asking at du we combat the only approved the volume that was in the application pending for the permit at your agenc agency. and since these volumes, depending on the level of the volume impacts the ability to finance the project. it seemed ready troubling, and according to at least my staffs reading, the department of energy doesn't have any statutory authority to even consider a ferc proceeding under the natural gas act. can you comment on that? that's what i'm asking about what the coronation protocol, if any, is. because it's obvious the d.o.e. base their decision on terms of volume approval, partially on what your agency was doing.

>> i think we delve, are dealing with the application that is before us and the dimensions of what we were asked to approve. without reference to the fact that the d.o.e. application was apparently for a different amount. i did have to take it back and dig into it more, but i didn't think -- i guess the question is why the company put in two different amounts and two different applications. >> my time is expired. i'm not casting aspersions. strategically this permitting process is something we need to get right. >> the gentleman's time has expired. this honor recognizes the jeld wen from california, mr. waxman, for five minutes. >> thank you, mr. chairman. chairman lafleur, i know you focus on electric reliability and grid security during her tenure on the commission. and i think you are right to make that authority.

in my opening statement that talked about an april attack on an electric grid substation from california. minus 10 is that this was a sophisticated attack using military stop weapons and real damage was done and the consequences could have been far worse. you and i discussed this incident when we met yesterday. chairman lafleur, do you agree this is a serious, sophisticated attack on the electric grid? >> absolutely. >> do you share fbi's concern about publicly discussing details of the attack? >> yes. because of the potential for copycat attacks if too much is disclosed. >> without getting into details, as anything like this physical attack on electric grid ever happened in the united states before? >> i'm not aware of an incident with the same sophistication and all of the elements.

they're certainly been sabotage type incidents to you revert to the arkansas one in people cutting down power and things. i have her do that, and this one seems a little unique to me. >> before you step down as chairman, mr. welling topless personally briefing officials about this attack. the fbi has agreed to brief members of the committee. would you be willing to have ferc members brief members of all? >> yes. >> as ferc have authority to directly issue stems to protect the grid, physical and cyber attacks? >> i believe to an extent under the to 15, because there are physical standards for data centers and some of the better part of the cyber standards with some authority spent the authority to directly issue standards? >> no. it would have to go through the same process you refer to. we can direct -- development of

a standard and industry develops and files it. >> well, as ferc even had the authority to issue orders to a utility in a grid security emergency? >> no. that's one of the things that i think a lot of the legislation has that's been pending has given either ferc or d.o.e. emergency authority. it's lacking on legislation. >> you would think it would be appropriate for congress to address this gap and authority? >> yes. >> let me ask the other commissioners as well. each of you agree congress needs to address this gap in authority? >> yes. i think because of the emergent nature of some of these threats, it's a good discussion for congress. >> mr. norris? >> yes, i agree. someone has to be in charge to make the decisions it were under threat. >> mr. clark? >> i concur. >> this committee should be working on a bipartisan basis to

ensure that ferc has the authority it needs to protect the grid from physical and cyber attacks, and now, mr. chairman, we can rebuild a bipartisan consensus we had in 2010 on the need for legislative action. i yield back the balance of my time. >> the gentleman from california years back. this time recognize the gentleman from illinois, mr. shimkus, for five minutes. >> thank you, mr. chairman. thank you all for coming. a lot of issues. i'll make a couple statements and i've got a line of question that is pearl buck to southern illinois. the person is, and this is based upon your testimony and some of my colleagues. shame on us if we have rolling blackouts in the midwest in 2016. shame on us because it turns back to a third world country based upon not balancing our portfolio properly. and the point being is we're always going to need a base load generation. ideal on the nuclear side. i think there's an attack on nuclear power. we know there's an attack on

cole. we've got renewables coming in but they are not at the levels we need to maintain adequate supply. that's why the discussions that the chairman did on the epa and this discussion about reliability, we really need your help on this because we cannot go down that route. i think there's got to be a way, we've got to start talking about incentivizing major baseload. 800 megawatts, 1600 megawatts facility to make sure that they are still here because of the pressure that's being placed on them because of natural gas and epa rules and raise. it's a reality and we all know that. that's my little statement. i'm chair of the visitors of west point. i want to follow on the transmission grid issue. i was time to get some information, didn't get that done in time. but for the sake of clarity of my constituents in southern

illinois, and i'm just going to make this a general question, and whoever is more apt to be able to answer that, that would be fine. it is a huge transmission line project that goes from the missouri border to the indiana border, comes right across the state of illinois. it's called the illinois rivers project. one of the major fights has been on the route, as you can imagine. and just for the record it's my understanding that route approval is something done with the states, specifically the illinois commerce committee and not a ferc matter, is that correct? everyone is shaking their heads saying correct, thank you. this will get a lot of my constituents off my back, that's why i'm asking these questions. a second major concern is been over the return on equity provisions. some are questioning the 12.3% and want to know why they

received the percentage regardless of how the project is conducted. am i correct that the return on equity is from the transmission owners agreement that was approved a ferc in 2003? i'm seeing -- >> yes, with jurisdiction over the return on equity. >> thank you. and the return of equity would be applicable to all transmission owners in the region and the projects, not unique to the illinois rivers project, is that correct? >> yes. there's a regionwide return on equity. >> great, thank you. acid there was a proceeding pending before ferc to read by what return on equity or interested parties were able to submit comments on the 12.30% return on equity rate at ferc. can you tell me what it stands and what the process is at the process is that ferc region and making a determination on that complaint? >> i'm hesitant to comment on

pending open dockets before us but i think you have my commitment, and i suspect those of my colleagues, to give the rov cases that are pending before us a very high priority because we know they are important and there are several are we transition cases pending before strategy reference are very important to the companies. and the transition grid. >> the interesting thing but this transmission grid, the citizens of southern illinois are getting no benefit from this line. it's just a pass-through. so the personal destruction, and pass-through because of renewable portfolio standards and states is trying to wield in green power. so that really needs to be part of the consideration to understand it as these fights go on inciting, there's no benefit to the folks in southern illinois. let me in on -- i wanted to also

end on this issue of lng export because i do also, in do also, in addition to guide is democracy in eastern europe. and these lng exports are critical to our nato allies, poland, lithuania, a lot to stop the extortion by russia, and using energy as leverage and power. so i agree with chairman emeritus barton, this is not just a critical issue for us. this is a critical issue for peace, democracy, and our allies in there and hope you can keep that in consideration. yield back my time. >> the gentleman's time has expired. at this time recognize the taliban from texas, mr. green, for five minutes. >> thank you, mr. chairman. and first of all if you can tell by my accent i'm from texas and i have a district in houston and at the people i was born there but i've never not lived near a pipeline easement in the houston

area. so crude oil, natural gas, liquid, you name it. so i don't have that they concerned about it but it's just a part of the way of our life. argument has jurisdiction every two years to do pipeline safety. we passed a good pipeline safety bill last congress, and i can show you any figures we will find technologies improved in how we can do with it, and hopefully we will pass another reauthorization with additional standards that will make them even safer. commissioner clark, in your testimony state approximate 75% of our daily consumption is covered by north american resources. you also state we are more succeed or -- such year -- secure. would've viable north american energy market for the our security interests? >> infrastructure generally helps forward our energy security future. with regard to the 75% figure, that was in reference to liquid

products, crude oil. we have about 75% covered from north america resource but on the natural gas side is off the charts. it's way over 90%. >> in a recent cross-border decision, ferc stated and a -- export natural gas would stimulate the flow of goods and services. what experience or authority would allow ferc to make such a declaration? >> again, the bill you are referencing is 3300? >> no. this is ferc stated the export natural gas with economic policy to stem the flow of goods and services. i was asking what authority or expense did ferc have to show that to make a statement? >> ferc's ability to cite infrastructure is clearly critical to the nation's energy security future and to our national interest.

>> would you agree that the statement that the promotion of strong national economic policies within ferc's decision-making purview? >> to the jury its authorized by statute, yes. >> has special expertise torn and make sound and reliable decisions relating to u.s. interests? >> generally speaking i believe yes. >> in a side note, a number of us went to mexico the friday before thanksgiving, and one of the things that was highlighted by our discussion with the members of congress it was the reason decision on the pipeline from texas manager gas pipeline in northern mexico. because they have a lot of resources but not enough production. my concern is that that was no problem at all. we may be selling or providing natural gas to mexico, but 20 or 30 years from now we may need to be importing it from mexico just because of our infrastructure that we're building up because

our price of natural gas, downstream, chemical, you name it manufacturing. but that was a big win, win -- with our neighbors in mexico. so i appreciate that on the cross-border pipelines, which brings me up to h.r. 3301. the north american energy infrastructure act, confusion over legislative or private ferc from fully comply with section three and section seven of natural gas act. if we were to amend the legislation specifically state that nothing in h.r. 30 '01 would affect the deeds applicable with the natural gas act, people in ferc with no longer have concerned with the legislation but i guess i'll ask speeded i think you've identified the important concern with the legislation to i think within amendment which i've seen in the discussion draft, i think we would be comfortable, i would be comfortable operating under the new law with respect to

natural gas imports and exports. the other parts of the act, electricity and oil, are beyond us. >> in other agencies are able to deal with those. i appreciate it. commissioner moeller, in your testimony state ferc efficiency would be improved and that many delays were caused by the lack of kindness from other federal agencies, can you provide more explanation on that? state agencies, we don't have a whole lot of oversight on but other federal agencies, is that delaying ferc providing the typical 12 month tournament on? >> yes. we could give you specific examples later if you want them, but it kind of depends, goes back to the point i made earlier. there's a lot of regional differences. is the management regionally makes the priority, it happens but if they don't they can drag their feet. >> before others all the time, chairwoman lafleur, there's some concern in texas about our reliability issues and a number

of us on this committee have made attempts to resolve an issue because the department of energy says you can do something with a power plant, but epa says no. and we're trying to correct that. i know our committee has passed h.r. 271, i would hope we would deal with that because that would help us at least in texas with some of our beloved issues but i think would help national. thank you for your courtesy. >> the gentleman's time has expired. the gentleman from pennsylvania, mr. pitts, is recognized by minute. >> in one. the concept of beneficiary pays is at the heart of the way our transmission system operates and assigns cost to i'm concerned under order 1000 ferc is defined benefits so broadly and spreading costs so widely that the simple axiom has no meaning anymore. chairwoman lafleur, please explain the idea come your idea

of beneficiary paid, what that should mean. and keep in mind i don't want my constituents thing for subsidized midwest went into my market with no voice in the process. i know you can't address the mayors of individual compliance filing under ferc's order 1000 but there's a legal point i'd like to raise with you, everything stands on its own to which i hope you will be able to respond. >> thank you very much, congressman pitts. the order 1000 required regions to plan cooperatively across the region as the region encompassing pennsylvania already does. and take into account three times -- the types of benefits, reliability benefits which can be very hard to quantify but are very real, the meeting public policy requirements to connect resources that states require them to connect which are known identified by the states, such as pennsylvania which has a renewable portfolio standard. and thirdly, come congestion

benefits to reduce the cost of power by building more transmission. and the order required regions to take those benefits into account in assigns a cost, and i think the region that pennsylvania is a part of is a good example of coming up with a hybrid proposal that use different types of cost allocations together for different types of benefits that i think is -- that we approved preliminary -- preliminarily in the first case. >> you think ferc has authority under the federal power act to allocate costs for new transmission entities that don't have a customer or a contractual relationship to the builder of the line, don't need the capacity provided by the line? >> i think that under the court decisions and our orders to has to be a proportionately between benefits and costs, but not

necessarily line by line. it can be a portfolio project that he region agrees to that some benefit here and some benefit another. and if the region agrees to it we assume they have negotiated that they all get something. >> can you show me what section of the federal power act against ferc this authority to allocate costs in the absence of a contractual relationship of? >> yes. we are relying on the sections of the act the record just and reasonable and nondiscriminatory rates, thinking that a process where the states involved and the companies involved negotiate the cost will help insure just and reasonable transition rates. >> mr. clark, in specific ferc order 1000 compliance filing orders, you've raised some very she's concerned about potential downsides of the commission's implementation, order 1000. can you elaborate on these concerns? >> sure. to the degree that order 1000,

congressman, deals with the need for perhaps greater regional planning, i'm on board with that. i think it's prudent for you choose to do so. to the degree it's about trying to come to more accommodation with regard to cost issues, i think that simple. where i have disagreed with the majority of the commission from time to time is with regard to how ferc has been understanding and allowing the isos and our deals and utilities to take into consideration those state and local laws that they still have to comply with because we have a federal system with its own substantial state and local compliance laws here and i attended to argue we need to get more latitude for those utilities that we regulate to continue to understand and comply with, and give them the flexibility to take into consideration the existence the of applause and not use order

1000 as an attempt to sort of shake up the jurisdictional box which i think just leads to greater litigation. >> under order 1000, it's predicated on the idea that insufficient transmission is being built. how does the order solve this problem? and how will we know when the proper amount of transmission is being built? will the marketplace tell us? will be utilities tell us? ferc? mr. clark. >> mr. chairman, the way i understand it will be an inner to the process but it will take a look at different shape in different regions but as i indicated the grid is highly regional by nation -- other parts you have regional utilities and states coming together and talking about some of those issues.

in other regions like the southeast you have a much different situation to you don't have access to renewables so you have a different regulatory structure in the state. i just been ferc has be open to understand each of those differences and accommodate those. >> the gentleman's time has expired. at this time recognize the gentleman from new york, mr. tonko, for five minutes. >> thank you, mr. chairman. commissioner lafleur, in your testimony noted improvement between the years 2011 and 2012 and the number of non-weather-related bulk power system related outages. as you know with several other related issues that can contribute to reliability problems. older transmission lines and great equipment. needs to be upgraded or replaced and an increase in severe weather events. that i've seen in my district and throughout new york can cause outages. in addition we have much more

reliance on i.t. in june for everything from financial transactions to research and manufacturing, things that require reliable power delivery. how are these changes in the nature of the demand for power, the aging parts of the grid and increased equity in the tent city of storm related disruptions being considered in ferc's reliability efforts to? >> well, thank you. that's a big question. i guess there's at least two different parts of the. one is the actual reliability standards to make sure that the transmission asset owners have the accountability over the refurbishment of their lines so that they operate properly in order to meet the standards. but secondly, we were talking about order 1000 mission planning, a reference was made to transmission rates. that's all a part of making sure that the structures are in place so that the companies can invest the money they need to replace

aging infrastructure. and as you know, i am probably with some of the aged resources in the region. it wasn't early part of the country to electrifying. >> thank you. thank you very much. capacity market rose to the pjm area and in, threaten to continue the belly of load serving entities to sell supply their own capacity resources to serve their own loads. this problem is particularly acute for publicly owned and cooperatively owned electric utilities because it endangers the ability to finance new generation units needed to serve their customer base using their traditional business model which relies on long-term contracts and lower cost debt. do you anticipate that public power or quadruplet owned utilities would be able to successfully exercise market power and rto capacity market?

>> this is a question that's directly been looked at in our ongoing capacity marketing in cory that is open right now with a very heavy purged -- participation of public power. basically the capacity market have a forward price of what reliability is worth. it's used to side with the generated, the existing fossil generation as the new generators will get paid for being there. and if people are allowed to bid in with a subsidized rate that doesn't refer to the market, they get pulled on the market rate and it could affect everyone's reliability. but muniz i was have the right to prove that the costs are low and showed the iso a big installed apply because they can get more cheaply. >> thank you. mr. norris, your tesla described any changes are sometimes occurring throughout the country. the power production use and delivery landscape. i'm particularly interested in the challenge that our successes with energy efficiency, demanding management and renewables are presenting to the

traditional economic models for utilities. the success of demand management is a good story but companies do not increase profits by turning out less of the major product. so how are we going to provide a continued and sent to seek more efficiency and data management of demand if these goals further erode utilities ability to earn profits? >> well, congressman, a lot of those determinations are made at the state level with retail regulation. what we've been doing at ferc is i make sure there's access to the markets for different new technologies that enable the responsive energy efficiency. you see it in the pjm market and a huge increase in demand response capability and that -- pjm has fostered development to demand response in that region. different regions of the country are looking at ways to develop better given response, more

demand response results. i presume it will be part of the package of solutions as they look at the potential capacity shortfall in 2016 and beyond. so what we're doing is to make sure that demand response gets treated fairly in the marketplace. so as a reward for investors and that technology. you see like a major restructuring of the power sector overtime? >> restructuring of -- >> of the power sector overtime. >> i think it's happening right now. you've got a lot more people engaged. historicallhistorically it's bel stations are owned by the guild and delivered to homes and businesses. now consumers want to be involved and engaged in the own energy production and more engaged in their energy usage. the development of the technologies on a smart grid are enabling consumers to do that. the traditional utility and power sector is having to respond much like what happened in the telecom sector. it's bringing great deficiencies to our utilization of energy.

>> the gentleman's time has expired. this time recognize the gentleman from ohio, mr. latta, for five minutes. >> thank you, mr. chair. and i think the commissioners for being with us today. i appreciate your testimony. if i could start with chairwoman lafleur. a series of questions if i could. under former chairman wellinghoff, for macs and issues included smart grid, demand response integration of renewables and order 1000 transmission. d.c. would be continuing on with the former chairman's goals or do you have other goals quick do you agree with, disagree or where do you see you directing the commission? >> well, if they time the question because i'm just in the process of talking to each of my

colleagues since the spent about a week that i've been in the job, to really set consensus objectives going forward. but i see that reliability and security will continue to be a top priority, and that includes resource adequacy because you need the resources to be reliable which we talked a lot about this one. we have a lot more work to do on transmission, so order 1000 as ugly commissioner moeller said is going to be a big part of our work for a while as those transmission rates. that was brought up. i think that he should the markets are fair and that they work to attract investment the country needs and that the infrastructure is there, are clearly for priorities. i think to be refined as we continued forward, but those are things that ongoing. >> if i could, just a couple of areas. like natural gas pipeline permitting, we would not be on your priority list?

>> i think i referred to that in general in the term infrastructure. but i think that in general i think i project group does the job handling the pipeline applications in a timely fashion to we are seeing a lot of them, especially compressor stations in the marsalis and went to continued and olympic we do about 92% a year and i think we should continue to do so. >> a special on the pipeline permitting is very important across the midwest, especially as you just said on the marsalis and ohio. one of the great things we have is we have all the natural gas. one of the proper have is we don't have the ability to get the natural gas where it needs to be. the potential in the high with the chemical industry at the same time being able to have that gas cracked and be able to use lies it again depends on the type life permitting so that's very important. also what about on organized wholesale electricity markets? where do you see you on that?

>> i see that as all the things we been talking about today, the power supply changing, we've seen a lot of changes in the markets to adapt to new resources and make sure the resources are there when the customers need them. right now we're focusing on the capacity market and i don't think that's going to change in terms of the level of cases or the amount of things we need to look at. >> okay, just one last question if i could, with you, madam chair. one of the best measures to determine whether the restructured wholesale electricity markets operated by regional transmission will organizations are benefiting consumers? >> that's the big question. i think certainly reliability is the key one but also looking at the cost overtime. it's very difficult to compare the cost of the restructured markets with places that didn't

restructured because the places that restructured with high-cost places to begin with. that's why they restructured. but i think looking at the cost and reliability are two big ones. >> commissioner moeller, does transport plan to have transmission activities of the non-jurisdictional entity? >> not that i'm aware of. >> okay. just want to make sure about that. and also, with my remaining 40 seconds, commissioner clark, in title vii of dodd-frank congress required ferc and the cdc to end into a memorandum of understanding dystocia procedures resolving jurisdictional conflicts over energy derivatives. what needs to be done in order to resolve the jurisdiction conflicts between the agencies and provide industries the certainty it needs. >> ferc's position, congressman, is that both agencies should

give the sheer information we can so we can do what we believe congress has intended us to do. whatever reason, for reasons that predate my term on the commission, that hasn't happened. we've had leadership changes in both commissions, and i'm hopeful that there can be away that ferc nctc can have a meeting of the names -- meeting of the minds and strike that. >> i yield back. >> the gentleman's time has expired. decembethis number to the gently from florida, ms. castor, for five minutes. >> thank you, mr. chairman. and good morning. i think you all are serving on the federal energy records were commission at a very exciting time. i mean, -- federal energy regulatory commission. this event remarkable time in the natural gas revolution that comes at important time when we are seeing natural gas supplants coal we know that it's vital to reduce carbon pollution. and then add on top of that all of the innovation and the smart grid, the man management and

renewables. while all that change is occurring, your responsibilities remain very important to ensure that consumers are protected, that you are charged with enforcing laws that protect consumers and ensure fair competition in the electric and natural gas markets. you've got to maintain your important relationship with state and regional partners to ensure that the necessary inch infrastructure gets constructed. but what mr. tonko was talk about, it's almost outdated now, the old utility model of selling as many kilowatt hours as possible. instead with what we know about smart grids and energy efficiency, we've got to be able to do some things, and some

states are doing it, to incentivize greater conservation. while at the same time keeping and i on our infrastructure and reliability. so i think what you'll have been doing to ensure that renewables compete on a level playing field is very important. also the energy efficiency and demand side management are also treated fairly if they compete with traditional power generation. ferc itself has said that they recognize demand response can help reduce electric price you can mitigate generation, market power and enhance reliability. you've issued a recent staff report, i know mr. norris is able to comment on. madam chair, could you comment on that recent staff report, the findings and what does ferc is going to be doing the job is great innovation across the country? >> well, thank you. yes. staff were something we do under the energy policy act and it looked at the level of demand response around the country.

our primary focus is on the wholesale markets. i think two years ago, had a significant case on how you compensate the matter of response energy market. there's a lot of issues penny with respect are you compensate demand response in the capacity markets and i think will continue to confront those as part of our capacity market and cory. i do think though that a lot of the effort to unbundle rates and incentivize efficiency is at the state level. and i know your commission is going to be the president of nehru soon anything that's where a lot of the innovation is still coming in the retail market. spent a just and like some states are so broke behind, i was in my state, we could do a much better job, and people are really waking up to the fact that young people now come to expect to build user smartphone turn down the thermostat to commissioner norris, you mentioned you have had

conversations with a number of utilities ceos about their electricity generation plants for the future. use of virtually all ceos you talked to said they were focused on increasing natural gas and renewable energy generation, is that right? [inaudible] >> why do you think they are recognizing, waking up to the fact that it's natural gas and renewables that are their future state? no, nation of low-priced natural gas and apparent abundance of supply. incentives for renewables and being state renewables portfolio standard. but one of the biggest factors, we haven't talked about today is just the uncertainty. the uncertainty of an investment in coal-fired generation. because as i said in my written testimony, those ceos and people i talk to him industry, it's not just whether, it's not

just whether when -- bitsy the wind legislation will occur or the likelihood it will occur at some point. it's protruding new coal-fired generation in this country spent the science that tells us we've got to reduce carbon pollution and the economics are telling us the exact same thing. and about the state of florida where now taxpayers will have to invest and are already investing huge sums of money to begin to adapt to a changing climate. think about the huge bills, the bills that come to every time have an extreme weather event, whether it's drought or super storms. and i would think that the utility industry also sees the writing on the wall, they're looking for the certainty and the more aggressive we are moving away from carbon intensive energy generation, the better. thank you very much. ..e gentleman from west virginia mr. mckinley for five minutes.

>> chairman lafleur, perhaps you can give me some direction on this. we have a growing problem in west virginia with the various constituents. currently a lot of it has to be shipped. a lot of it is being wasted which is a shame. that doesn't benefit the consumer and doesn't help the environment any. my question is what i am hearing more sensing is not unique to western region yet, the exploration of the number of states, seems to be a potential jurisdictional problem starting to flare up a little bit and one of the ms. so my question is to

you is should we be treating ngos as natural gas and allowing the federal government, your group to take care of that? or should we continue having ngos candle at the state level? do you have a position on that? >> haven't thought of the jurisdictional question. it is a good thing to be looking at. there is a lot of trended gas capacity as well as gas being fired because there is not sufficient take aways for the liquids. we only do the pricing for the liquid pipelines under the interstate commerce act but we don't do the signing. i suspect some of the states that think they do the setting very well would not welcome federal fighting. we could do it well because they do it well with gas pipelines but it might not be as popular

with the states involved but we have done a good job with that. >> are you going to take a more -- let the states continue to assert the role that otherwise is not expected? >> i didn't have a plan to read the fine natural gas under the natural gas act but it is something to think about. >> could you provide us in writing with a time frame and you said you were not prepared to discuss that but can you provide some rationale for the federal government to be involved in this? >> we will take that and think about it. thanks for the opportunity to think more. >> thank you. the last is more generic, but over ten years as an engineer in private practice we were concerned about the electromagnetic pulse and it has been mentioned here again.

i have been hearing about it for well over a decade but in the last five or six years people are talking even more, the last three years i have been in congress. where are we with this? are we just waiting for a catastrophic event to happen? there is an awful lot of talk but no action. >> i think i mentioned in my written testimony and briefly in my verbal testimony that last year the commission voted on a rule requiring utilities to have operational plans and response plans -- >> what is your expectation? >> i think the geomagnetic disturbance standard we will get and we have one pending will help someone with the electromagnetic pulse although i think there is also voluntary efforts in the north american transmission forum to talk about other aspects of the e m p but i think the giambi standards are

the most tangible action that has gone on in this area for a long time. >> is there progress being made just not unique to the western united states? >> i'm sorry, i didn't go this >> is there progress being made with other countries dealing with emts? >> a lot of progress being made in scandinavia, south africa and the united kingdom. a lot of other countries taking a wait and see approach. israel is doing a lot. other countries are taking a wait-and-see approach. >> go ahead. >> i recognize mr. gardner. >> thank you for being here and congratulations to the acting chairman. i want to follow up on a brief conversation to mr moeller we touched on earlier, an

intriguing question raised. in colorado in a couple years ago we had the high park fire which became the state's most devastating forest fire followed a week later by the wall polk canyon fire which became the most devastating natural disasters this year and we experienced the black forest fire. do you believe forest health threat as greater reliability? >> i recall being involved in that issue because we wrote the forest service after talking to colorado officials including a democratic state senator who works for the keystone foundation, very concerned about the amount of dead forest and its threat from a fire perspective on transmission lines. so yes, forced polk, a come from the state of washington, it is a big issue up their particularly

with the pine beetle the issue. should we hope for two more weeks of cold weather to kill those beatles? that is a mixed question. it would be nice if that threat to reliability can be removed. >> we would like to follow up a little bit more, commissioner moeller, we passed a high-power regulatory e efficiency act which revised small conduit hydro projects to investigate a two year licensing process for non power dams and closed storage project and conduct pilot project. can you give us an update on the commission's activities to implement these and what provisions of the law, the other provisions of the law and outline what steps to comply with the law? >> we have already received a large number of exemption applications for conduits'. they are all in some stage of the process. a couple have been approved and

others are close to approval so that should affect immediately. >> give us the idea of 18 and which ones have been approved? >> we will take that as a written question and where they are in the process. also it was october 22nd we held a technical conference on what we can do to speed up process and the two year licensing requirement. comments are outstanding right now. the folks in the hydro section are working on that. a lot of the other agencies contribute to the timing as well. we received fewer applications for the other parts of the law as of yet. 40 megawatt exemption and so forth. >> will you implement a pilot project in 2014? >> yes. >> you talk a little about the workshops, what you learned. do you believe we will be able

to get through the legislation in the next two years implementing the legislation? >> satisfy the intent of the legislation? i think that is our job. >> the process for excluding small projects from ferc licence, how does that work? >> it is working very well in your state because of the memorandum of understanding and we were entered into one with california a couple weeks ago. it is variable in different regions because some of the states don't have resources on hydro to have the same level of cooperation but it is something we put a lot of effort into. the hydro team has simplified the web site, the process as quickly as we can. >> do you me -- do you have a number and a determination that have been soft? >> i can take it as a question.

>> will we find out those denied, that would be great and provide statistics on the length of times they have taken as well. mr. moeller, a question for commissioner clark, behind the meter generation treated as a demand response resource or generation resources? >> i have issues with behind meter generation because it is not dispatchable like other forms and i will point you too a dissent that i wrote earlier this week on a particular order. >> i will follow up on the record with these other questions and ferc 1,000 order questions. >> congressman, to a great degree it depends on the record of each of those individual cases. i would have a concern in some areas and others if verification can be proven. i believe they may be able to

participate. a separate question with regard to compensation that should be given to those resources and from time to time i have disagreed with parts of the commission's orders on that issue. >> the gentleman's time has expired but the gentleman from virginia, mr. griffin for five minutes. >> thank you, appreciate that. earlier you were speaking with miss castor and you started talking about people were worried about building coal-fired power plants because of legislation. expand on that for me. >> there is a general concern that there will be at some point in time a cost put on carbon. because the uncertainty of when that will happen and what that will be, combined with other factors in place, natural gas

prices, epa rules, state requirements, just too risky for investment and nuclear is suffering the same problem on the cost aspect. >> natural gas is a concern because prices were lower right now, looking forward natural gas and coal have competed and will continue but with already existing and newly proposed epa regulations and the fear that legislation or additional epa regulations is a major cause why no one is looking at building a new coal-fired power plant. is that a fair statement of what you said? >> some existing facilities are being retired. primary concern was the anticipation at some point there will be a cost on carbon and

that makes the economics difficult to finance. >> all right. let me ask anyone who wishes to answer, the other markets, have you done any studies to determine whether or not those markets, the cost of electricity to the consumer. >> we get regular reports from markets and market monitors, years are running together but with in the recent past we compiled a major set of metrics from different artie os, cost metrics over time and the other eastern markets cost reductions, and being used to generate the electricity and also look at the transmission congesting and how that was coming down to provide

an update on that in written form. >> i appreciate that. had any of you had contact with the white house regarding the president's climate action plan? >> not me. >> isn't that interesting. they didn't talk to you about that. nothing you can say about it. >> we function as an independent agency. they don't give us policy guidance. they did call to make the acting chairman which i very much appreciate but didn't say anything about how to vote on anything. >> i was not asking if they would cause you how to vote on things but i was curious that they came out with a major plan, to get advice or seek input, and

you didn't have those conversations either. maybe i wasn't clear when i asked the first time around. >> i do coordinate with the department of energy on the electricity advisory committee but their efforts are more around transmission, storage, some other areas. the climate plan came from other parts of the administration. >> it would be fair to say they didn't see kenny information from you on how this might affect electric prices for the average american family. >> the white house didn't seek any information from me. >> i am going to assume they didn't contact me because they didn't know we existed. [laughter] >> i wasn't contacted. >> all right. i don't have any additional questions. thank you for being here today. with that i yield back. >> the gentleman yields back.

the gentleman from illinois, mr. kinsey. >> thank you for being here. competitive markets are the most efficient with a light regulatory approach would rules and regulations in place given the process is put in place by ferc, impact tens of millions of consumers. i hope the commission will work with all parties to ensure all aspects of industry are taken into account and to ensure that current and future energy demands are able to be matched. i understand ferc is in the process of evaluating market mechanisms in holistic fashion. a subset of the capacity markets in which it regulates. i appreciate the commission taking on this effort but i have a few concerns to discuss to determine where this effort might lead and whether or not it may be unnecessarily limited. chairman lafleur, what does the chairman commission intended to with the information is gathering in this proceeding? >> on the capacity markets, that is very much a work in progress

going on right now but i think potentially illustrative example is what we have done on guess electric where we looked at a large number of comments around the country and a large set of them have to be handled regionally and will deal with it with each region of the country but a couple issues we may look at across more than one region and that may be the future capacity market but i want to read the comment and talked to my colleagues. >> have you discussed expanding the server to include other wholesale capacity markets as the commission regulates? is there reason for limiting the inquiry? and capacity markets alone? >> there was a reason to limit the technical conference, a largely parallel fashion, largely mature, the voluntary capacity market is considerably

newer and if we thought it might be difficult to do the mall in one day, there is certainly no reason we won't in the future be looking at other places if the need arises. >> electric generating assets and the life span of 40 to 60 years, organized electricity markets typically operate three years ahead. lafleur and mr. norris, is there a fundamental mismatch between the investment recovery profile of electric generating assets and the way merchant markets are structured and the believe ferc has a role in addressing this problem? >> yes. there is a disconnected. the capacity markets were designed to make sure there is adequate margin for the long-term future. some current capacity constructs were largely put in place to provide a revenue stream for generators spun off in

restructuring areas and there was a cushion of time for that to play out. we have to look at capacity markets and play a role structuring them so long term supply is available for adequacy. >> the reason we are looking at capacity markets is to see if they attract the investment we need and that includes based load, intermediate, demand response, all the things you need to run a great and that is what we are looking at. >> does the commission have plans to review and improve market rules so wholesale markets and given the signals to allow investment decisions to be made in the power sector? >> the purpose of the wholesale market rule is to attract the investment for reliability. that is within our responsibility. >> finally do you think the federal power act authorizes ferc to subsidize transmission of remote wind power over

cheaper local renewables? >> i don't think it authorizes the commission to subsidize such lines. it charges the commission was trying to make a reasonable attempt at allocating costs on a commensurate basis with beneficiary principal. the seventh circuit through the course of a couple major cases has given us the goalpost in terms of what our responsibilities are in terms of signing those costs. >> thank you for your time. i will yield back 36 seconds. >> thank you. at recognize the gentleman from texas, mr. hall for five minute. >> thank you for appearing here today. questions were touched on earlier. i was in another committee where we were trying to pass everything we can before getting to go home for christmas. i have been hearing about a new technology coming gone to the market and i am from texas and

interested more than most important word in the dictionary for young people and they have no jobs today and if we go the way we are going there will be no employers in a year's so you have an important job. manufacturing this solution out of gas liquids to make easier to transport to a customer who treats and can use it as an electric generation or whatever they want, and i am told it is a new technology, relatively small equipment often modular and can be moved from side to side which is important to capture stranded gas. or can be installed in existing port facilities. i hope ferc can enjoy new beneficial facilities, blackfish subjected at the same time,

extensive review process is a major project. some of these new technologies don't always fit the rooms that you have and are forced to fit into a category but just because you are supposed to regulate or feel you have to regulate them, new businesses will never get off the ground. i hope you won't feel you have to conjure up ways to regulate something if you haven't been regulated by an act of congress and that is a question that is not meant to be insulting in any way because i admire you. do you have any short statement you want to make to what i said so far? >> i believe we have to stay in our jurisdiction as has been observed several times today. we have been given quite a lot of it. we are not short of things to do. we try to follow the law. >> congressman of the one that i agree with chairman lafleur.

coming from north dakota where we have significant concern with flared gas -- >> you have no role to play. >> i understand the technology, i am intrigued by it but i was concerned anything we can do to advance technology and allow us to capture and utilize valuable resources was something we should think of. >> we go back 25 years and some of this have been up here. we passed the clean air act and clean water act and took several sessions to do them. we preflight into the epa. i remember that. even though i was a texan and believe in energy, paid 60% of the taxes it was paid in texas, we felt it was very important. we breathe life in the epa by giving them a role in that act. i am sorry now that we did because they acted well then and we were pleased with what they

did and even though we were energy oriented, energy people needed some supervision but they needed some help the federal government could give. so they hurt us by overregulation. that is what i was asking you about i guess. acting chairwoman, ferc's strategic plan, 2009-2014 called for safe, reliable and efficient infrastructure development to integrate new resources. are you supportive of ferc, have you been there three weeks? >> i have been here three-1/2 years. i have been in this job two weeks. >> you have done very well and i thank you for the answers you have given but are you supportive of ferc's goal for infrastructure development included in this plan? >> yes i am. >> would you consider changes on

this goal? do you have any changes you would make? maybe you haven't had time. the other gentleman might. >> what i looked at most recently in the strategic plan written at a high level and i think most of it is things like just and reasonable rates, robust infrastructure which i do not think there would be any need to change. as i said, as we look at the current situation where the country is i want to meet with my colleagues and figure out are there things we need to give more priority to and i want to do a little work before i answer if possible. >> commissioner moeller, the administration continues down this path, taking few choice decisions away from the electric industry if they do and reducing fuel diversity, with negative consequences would you expect? >> we have to watch reliability

very closely. a number of us made references to the midwest but it is not the midwest in the next few years. the next few summers very concerned about making sure we have resource adequacy. >> is my time up? >> i am sorry. >> i guess i will yield back. >> we were all so mesmerized by your comments that i forgot the time too. at this time i would like to recognize the gentleman from nebraska, mr. terry. >> i am your favorite witness, the last. i want to follow up with mr. norris because part of the discussion has been up about a carbon ride being built in that the carbon price is based on the uncertainty of what will happen regarding carbon, that intrigues

me what you were talking about because yesterday i was hit up by a reporter that asked me a similar question about energy companies already starting to build in a carbon price. the question from the reporter is what are you guys doing in congress about the carbon price? and i said nothing. we aren't trying to artificially inflate, at least legislatively, energy prices, or verbally through attacks. so it begs the question since there is a lot of discussion about building in a carbon price, is there a discussion in ferc that you have been involved with for know about as an overt attempt to raise prices based on

carbon, or any other thing that would innocence increase costs based on carbon? >> in short no. the reason for my comments and my testimony is to make you aware of a major factor and the change happening, the uncertainty about when or if there would be a price on carbon. >> i think there is some merit to the if because there are a lot of people pushing that. there is no legislative attempt but it also begs the next level question on natural-gas, in particular. you just had some discussions about flaring in north dakota. i have pictures on my iphone about that. the subcommittee took little trip up there. we are burning it off, have an ample supply and there's uncertainty in that harry as well based on some environmental groups and even some people on this committee that would like

us to stop using the technology of hydrofracturing. have any of you had discussions about the impact of any policy impact spawn hydrofracturing, how that could impact the reliability and affordability of electrical generation in the united states? let's start with the acting chairwoman and congratulations, that is a good call from the white house. i am looking for any call from the white house on any of the issues i have asked them to talk to me about that that is an issue for a different day. >> we don't regulate hydraulic fracturing. we have been asked in some of our gas pipeline cases to evaluate the environmental impact upstream and downstream and we have taken a strong line under the natural environmental

policy to look at the impact of the project, part of the discussion of fuel diversity in gas, electric, there has been general discussion of should the rules change on natural gas, we have to be alert to that because it could affect reliability but no direct impact. >> one of the discussions we had with ignacio zamora in -- with ferc in the past is coordination with ferc on natural gas, and other entities, it epa for example, reliability. how has that -- everyone trying to get on the same page in regard to natural gas? chairwoman. >> as part of -- most of the discussions i have been present with on the epa have been about specific sweeps the regulation

we discussed. ice tailored to discussion of regulation of natural gas but i have not been part of discussion of fracking. >> this is natural gas in general and reliability because there's going to be an issue as some of these plants are unable to use coal because of the new standards being produced and there will be a time when they either shut down or move to natural-gas. that is going to affect reliability. .. discussions are occurring with the epa and other agencies so that you know that this is going to happen. and how you're going to deal with it. >> well, should there be a time when i have any reason to believe the natural gas supplies going to be interrupted i would certainly take part in those discussions. everything we are seeing -- >> this will be more about the downtime of plants, either shut down or shut down to retrofit. because you can't got a coal power fired